The welfare impacts of an invasive species: Endogenous vs. exogenous price models |
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| Institution: | 1. Department of Physics, Texas Tech University, Lubbock, TX 79409, USA;2. Department of Physics and Astronomy, Trinity University, San Antonio, TX 78212, USA;3. Department of Physics, University of Texas at Austin, Austin, TX 78712, USA;4. Department of Chemical Engineering, Texas Tech University, Lubbock, TX 79409, USA;1. Department of Environmental Studies, University of California, 1156 High Street, Santa Cruz, CA, 95064, United States;2. Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign and Resources for the Future, United States;3. Department of Biology, Missouri Western State University, United States;4. Department of Aquatic Ecology, Swiss Federal Institute of Aquatic Science and Technology, Switzerland;5. Department of Economics, University of Wyoming, United States |
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| Abstract: | The “fixed-prices” models used to measure damages from invasive species typically overestimate financial impacts. These fixed-price assessments do not address key behavioral modifications that lower costs as people adapt by changing their mix of inputs and outputs given new economic circumstances. Using the invasive emerald ash borer (Agrilus planipennis) in Ohio as a motivating example, we develop a computable general equilibrium model that accounts for these behavioral responses. We estimate annual damages from the beetle to be about $70 million, an order of magnitude less than the $400–$900 million in damages estimated using a fixed-price model. Damages are lower because people adapt through price and income adjustments that occur after ash trees are devastated from the emerald ash borer. |
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